High street saturation affecting rent reviews, say valuers
The slow A3 letting market is making rent reviews difficult, according to Bill Graham and Paul Newby of property agent Fleurets.
When conducting a rent review, valuers generally use comparative data - that is, what other pubs pay in the area - as evidence.
However, as the market is already saturated and fewer operators are currently taking on new leases there is an inconsistency in negotiations and a lack of rental evidence.
"Current evidence of new lettings is virtually non-existent mostly as a result of saturation," Mr Newby explained. "In fact, the only deals being done are on either prime sites or a few where there has been a significant time drag on planning or licensing."
Making a presentation at the Association of Valuers of Licensed Property meeting in London earlier this month both men argued that the current high street market remains saturated, with lettings few and far between.
During the 1990s operators bought up high street A3 sites, which resulted in many town centres being over-pubbed. With demand for sites at its peak landlords could drive hard bargains on rents.
During many rent reviews the customer floor area and the level of sales generated are used to compare one pitch with another.
However, the problem with these rent reviews is that A3 properties vary widely by location, size, ease of operation and local competition.
But Mr Graham argues that a hybrid version is the best way forward in the case of rent reviews. This should reflect the operators ability to pay, with some recognition of the situation in the market place. He supports sales per customer per square foot as a better piece of evidence. "Lowly sales per square foot will show problems of location or operation - high sales per square foot, just the opposite," Mr Graham points out.
"A comparative can then be made to establish the correlation between rent and sales within the customer area."
Pictured: A section of Watford High Street showing four venues - valuers say that the saturated market has resulted in some inconsistency in rents.
